Textura Off 17% on Citron Fraud Report; Company Rejects Inaccuracies

By Tiernan Ray

Shares of Textura (TXTR), which provides hosted software for construction companies to generate invoices, and other back-office functions, closed down $6.44, or 17%, at $31.30, and fell as much as 21% earlier in the session, after the folks at Citron Researchissued a report calling the company a fraud.

Textura did a secondary stock offering in September, after coming public in June and shotting up 75% amidst enthusiasm for all things cloud computing. The shares today are well below the secondary offer price of $38.

The folks at Citron call Textura a “mashup” of the movies American Hustle and Wolf of Wall Street, writing “If it were not for the IPO game and the fraud committed by the underwriters, Textura would have been insolvent last year.”

The report lists a variety of instances of fraud and mis-representation, including having been forced by the Securities & Exchange Commission to withdraw from its IPO prospectus the claim that it has a “high client retention,” and also the claim it has experienced “growing demand” for its software.

The Citron staff write, “In over 13 years of publishing and reading SEC comments we have NEVER seen a company make two bold claims as above, but simply turn and run from them without even an attempted defense when challenged by SEC staff.”

Moreover, Citron alleges that the company’s CEO, Patrick Allin, was operating a shell company scam prior to running Textura:

In 2002, when Citron Research was in our second year of publishing (as Stocklemon), we ran across Patrick Allin. Those of you in the markets during this period might recall the wave of stock fraud that surfaced following the 9/11 attacks, which played on America’s fear – expressed in the financial markets as the demand for more investments in security solutions companies. In fact, “prior to co-founding Textura”, Patrick J. Allin was the CEO of one such company. As early as January 15, 2003, Mr. Allin was appearing in press releases as the CEO of Patron Holdings (later Patron Systems), promising a bright future of “driving growth and profitability”. In fact, during 2002, Patron was purportedly engaged in a strategy to buy various security technology companies such as TrustWave Systems, and roll them into an OTCBB shell company called Combined Professional Services [OTCBB:CPFS], (rollup announced Sept 27, 2002 here). The share exchange transaction (disclosed to SEC here on October 22, 2002) was signed by Patrick J. Allin as CEO of CPFS [...] Yet, in true Wolf of Wall Street fashion, the public company was only cannon fodder for a classic pump-and-dump “boiler room” operation run out of Florida Discount Brokerage.

Textura’s real business is nothing more than an unimpressive niche software utility for submitting requests for payment:

62.8% of Textura’s revenue is generated by its flagship product “CPM Solution” (e.g. Construction Payment Management) which is nothing more and nothing less than a utility software program to manage the submission of signed Lien Waiver forms. For those of you who aren’t familiar with construction, Lien Waivers are one-page signature forms that all subcontractors on all typical construction projects need to sign in order to get paid. You can see from the link how simple the form is. Yes, there are a few variations on the theme, mostly due to minor difference in some state laws, but they’ve been around forever. Most of them are one pagers, and every contractor from the biggest to the one man shop knows what they are.

Citron thinks the stock is worth a fraction of its current price: “if fraud, growth, and profits were not a factor (now our movie is a fantasy), then Textura could be comparatively valued at 3.2x gross revenues … or appx $4 a share.”

Textura Corporation has learned that a report was posted today alleging that fraud, collusion and deception were involved in the initial public offering of Textura and its filings with the Securities and Exchange Commission. Textura finds this report to include a variety of inaccurate and misleading statements and gross distortions. Textura completely rejects any allegation of fraud, collusion or deception in Textura’s IPO or SEC filings. Textura encourages investors to rely on Textura’s filings with the SEC as providing accurate information regarding the company and its performance, and not to rely on reports which may have purposes other than giving investors accurate information and impartial analysis.

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There are 4 comments

DECEMBER 27, 2013 12:32 A.M.

Russell Miserendino wrote:

I am not having any difficulty with Yahoo Finance because their updates have completely DELETED MY THREE PORTFOLIO ACCOUNTS!!!!!!!!!!!!!! What gives? Next time test your updates before you ruin a perfectly good site. It worked for me.

I have no problems with Yahoo Finance because they have completely

DECEMBER 27, 2013 8:27 P.M.

Anonymous wrote:

any report out of citron is a self-serving piece of crap.

@russell: you are SO far off topic, its not even funny. go put up your idea of pressuring the stock somewhere else.

DECEMBER 27, 2013 9:15 P.M.

drdon wrote:

Andrew Left/Citron at work again. If anyone should have the moniker, "The Wolf of Wall St." it should be Andrew Left, who is a rather unsavory character with a record of illegal activities dating back to his entry into the financial world.

FEBRUARY 19, 2014 8:01 A.M.

robert wrote:

wow now these dirt bags from citron are attacking medbox, sure its a marijuana stock but the lies and manipulation these SHORT TRADERS go to are i would say ILLEGAL!! and need to be investigated seriously

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.